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Your home is officially for sale. What’s next? Getting offers! The road to your closing day can be long, but you can make it easier by being prepared. We’ve put together some of the best things you can do to ensure you’re ready to receive offers and, more importantly, ready to sign on the dotted line come closing day. Here you’ll find four guides on how to ensure a smooth and successful closing:
1. How to Be Prepared for Offers
2. Calculating Your Net Proceeds
3. What to Consider in an Offer
4. The Timeline to Closing
Before any offers start rolling in, there are several steps you can take to make sure you’re as prepared as possible. From knowing what questions you’ll be asked to being ready for document requests, we’ve assembled a few helpful checklists so you know what you need to be ready. Then, you can focus on the fun part: receiving and accepting offers like you’re a home selling champ. Here’s a quick guide on what you need to do in advance of receiving offers on your home:
Time to sort through all the paperwork you discovered while decluttering the house! Having the documentation from when you originally purchased the property will be extremely valuable during the closing phase and can help you save time and money. Dig up what you can and keep the relics handy throughout the selling process. Some of the specific documents that might be helpful while you’re listed include:
You’ll need to disclose anything that’s on this report on your property’s Seller’s Disclosure Notice so keep this handy! If this report is less than four years old, you’ll need to make it available to interested purchasers.
If you’ve had an appraisal done when you purchased the property or refinanced it, the appraisal report can help justify your list price. If you’re on the MLS, this report can be uploaded so that other agents can access it.
When you purchased the property, you should have received a survey. In layman's terms, a survey is half blueprint, half map. Sometimes this document can be on a very large or long piece of paper. If you have this, hold on to it because this will be required for closing. Depending on your offer terms, having the survey could save you closing costs.
Keep documents on hand that state how much you owe, who services your loan(s), your loan numbers, etc. The title company will need all of your basic loan information (loan number, company, contact information, etc.) prior to closing. You may also want to request a payoff quote, so you can have an exact estimate of how much your net proceeds will be from the sale of your home.
Keeping track of upgrades you did to your home by creating a detailed list will be immensely helpful for marketing your property; however, if you’ve kept receipts, that’s even better. Receipts are great to have for the appraisal and could be useful when agents are looking at comparable properties.
Often times the purchasers of your property will be curious as to how much the utility costs are. Providing past statements, especially those with a graph showing the past 12 months, will be helpful for interested buyers.
If you live in a condo or a property with an HOA, there’s a good chance you have the documents on file from when you purchased it. These may answer potential buyers’ questions and are nice for you to have on hand when questions like “what does the HOA allow” are asked.
There will be new forms that you’ll need to get through as well. It’s important that you complete each form in a timely manner when you’re listed or when an offer is received. Ideally, you’ll have completed all the required paperwork for an offer prior to listing. Not having all your required documents can give buyers an “out” even after you’ve signed a contract, so it’s important to get everything done as quickly as possible. Here are some “new” documents that you should be prepared for:
This is a form that compliments the survey, which you should have on hand to be notarized. On the T-47, you’ll note any additions you’ve made to the property since the last survey was completed, such as decks, patios, sheds, garages, etc. You’ll need to make sure that you have a valid survey on file before you tackle this form though! This is the only form that needs to be notarized.
On this form, you’ll need to disclose everything you know about the property. In the state of Texas, this is required and can only be completed by the seller of the property–meaning you can’t ask your real estate agent to complete this for you. Anything that you’re unsure of needs to be marked as “unknown,” and you must be truthful in your answers. We won’t sugar coat it, this is probably one of the more grueling pieces of paperwork you’ll come across. But getting it done and out of the way (truthfully and completely) will save you from even more headaches further down the closing road.
We mentioned the receipts for your upgrades earlier, but now is a good time to sit down and come up with a list of all the things you did to enhance your home after you moved in. Even the smaller things like replacing the fixtures in the kitchen should be noted. More obvious things like patio and deck additions should be listed, but also be sure to denote how much money was spent on each upgrade. Again, this list is a must have come appraisal time but will be good to have put together upfront as well.
If your property is located in a special water district or any sort of Extraterritorial Jurisdiction, there will likely be some documents/disclosures that you need to sign. These will inform the buyer that they are about to own property in one of the said areas and will signify a “formal” notice to them. Ask your agent or any attorney if you’ll need to sign any of these documents.
If there is a Homeowner’s Association associated with your property, there may be special assessments that will need to be turned over to the new buyers. Assessments like this may be for things such as a sidewalk installation that the future owners will need to know about. Keep HOA documents like this handy so that when you sell, you won’t need to go digging for it.
When you meet the criteria listed above, you’ll need to present proof of an energy audit to the buyers of your home before the option period expires. While this is not a contractual obligation, it is required by the city of Austin. It’s best to get this done during the “pre-listing” phase, so that you don’t need to scramble to get this audit scheduled when it’s crunch time. This is one piece that can sometimes go overlooked so don’t forget about that ECAD audit!
When you’re on the market, either you or the agent representing you will receive questions about your listing beyond how many bedrooms it has or what the square footage is. List price is often times something that gets questioned, and it’s up to you to be prepared to answer. Here are a few FAQs we recommend you be ready to answer while you’re on the market:
It’s time to spill the beans on why your property is on the market! Whether you’re on to the next chapter of your life or looking to ditch the investment property, be ready for this question to come your way. In the same breadth, take this opportunity to give all the details on what you loved about the property–telling potential buyers this could spark an emotion and bring about an offer.
Take into account how high or low you listed your home. Did you list low for a fast sale? High so that you can negotiate? Knowing how firm you are on the price is important and will help filter out offers that may be a waste of time.
Remember when we said that you should know your loan information? We meant it. This question may come up from buyer’s agents and the potential buyers, though you are not required to disclose this information. However, knowing how much you owe is important because you’ll know how much room you have to negotiate, and what you’ll walk away with from the closing table.
Keep in mind everything from HOA dues to taxes, and of course, those loan payments. Being current on payments will make for a smoother close but being honest if you’re not will help just as much. Once a property is under contract and the title is opened, any liens or clouds on the title will be revealed, so it’s important to be forthcoming about any liens or encumbrances on the property.
You’re not off the hook yet with property preparations. In fact, now through closing your home should remain spotless. It’s tough, we know, but here’s why:
We bet you’re curious about how much cash you’ll be walking away with from the closing table. There are plenty of factors that go into the bottom line outside the sales price. You’ll need to calculate all of these costs to determine the total proceeds you’ll receive from selling your home:
Congrats! Your first offer has arrived! And if you’re lucky, maybe you even have multiple offers to choose from. While this is all wildly exciting for you, there’s a lot of analysis to be done. That might not sound like fun at all, but there’s a lot to consider in each and every offer you receive. There’s more behind the sales price than you might think! Let’s walk through what the most important aspects to consider in an offer are.
Well, this is somewhat obvious, right? This will give you a pretty solid idea of what you’ll walk away with at the closing table, but as you’ll see, there’s much more that you should be taking into consideration.
The owner’s policy or owner’s title insurance will be based on the final sales price of the property. This is an insurance policy to protect the buyer from any losses as a result of errors in the title. It is customary that the seller pays for the cost of this policy to be issued to the new owner.
In the Texas purchase contract, you’ll find this under Residential Service Contracts. It is actually in the seller’s best interest to pay for this; it will protect you from having to deal with any issues on the property after the sale of the home. Costs for this can vary but are usually just a few hundred dollars. Your obligation to reimburse the buyer for a certain amount will be outlined in the purchase contract.
This cost is explicitly outlined in the purchase contract and, per the contract, can be applied to “in the following order: Buyer’s Expenses which Buyer is prohibited from paying by FHA, VA, Texas Veterans Land Board or other governmental loan programs, and then to other Buyer’s Expenses as allowed by the lender.” In other words, some loan programs prohibit the buyer from paying a certain amount of the closing costs, therefore the seller is responsible for the amount noted in the contract. This section also notes that the amount the seller pays shall not exceed a specific amount.
If your property has required membership in a property owners association, there will be fees associated with the acquisition of the resale certificate as well as the transfer fee. In an addendum, it will be outlined as to whether the buyer or the seller will assume these costs. While these fees likely will not exceed more than several hundred dollars, it’s important to pay attention to what the buyers are willing to contribute on this front as it will affect your bottom line.
When formally defined, earnest money is described as a buyer’s evidence of good faith in purchasing a property. The earnest money will be put towards the buyer’s down payment at closing. It is often called good-faith money for this reason. Time is of the essence with the delivery of earnest money to title. When comparing earnest money among multiple offers, the highest earnest money amount may indicate a stronger offer all around.
In Texas, purchase contracts will have option periods during which, per the contract terms, the “Seller grants Buyer the unrestricted right to terminate the contract by giving notice of termination to the Seller within X days after the Effective Date of the contract.” During the option period is when an inspection of the home will take place. The buyer will come back from the inspection with possible repairs and updates to contract terms via an amendment. Bottom line, a shorter option period (or no option period) indicates that the buyer is particularly serious about purchasing the home. If comparing multiple offers, the option period length is a big item to consider when selecting the best offer.
The Option Fee is the amount of money that the buyer agrees to give the seller for the option period. If the contract is terminated during the option period, the seller keeps this fee. If the contract does not terminate, the option fee may be credited to the sales price at closing. A higher option fee will also signal a buyer’s goodwill in moving forward with the purchase of the property.
While you may be focused on the money side of things, remember–just like the option period length–it’s important to take a close look at the closing date noted in the contract. It’s likely that you’ll want to get to closing as quickly as possible, so take note of what’s been indicated in the purchase contract. Sometimes, financing will play a role in when you can close–details on this will be noted in a financing addendum to the purchase contract. Once again, a quicker close can suggest a buyer’s willingness to purchase.
Cash closes can be quicker while having a buyer who needs financing will result in a slightly slower closing process. There are also different types of closing options to be weighed out as well, as each may have its own approval process that plays a part in how quickly you can close. Take into account what financing option the buyer is presenting–especially if you’re in a multiple-offer situation. Be weary of glazing over the Third Party Financing addendum, and keep in mind the points, interest rate, and days for loan approval.
Sometimes a buyer will indicate when an offer needs to be accepted by before it expires. Do not overlook this. You should treat every offer with urgency to begin with. If an offer expiration is part of the contract terms, it’s especially important to either counter or accept the offer within the given timeframe, otherwise it will expire.
In some offers, items that typically do not convey with a property can be included as part of the contract. In Texas, this may include things such as the refrigerator, washer, and dryer but can also include patio furniture, grills, items in the garage, etc. Certainly don’t overlook this as part of the contract and be prepared to know which items you’re willing to part with. Remember that selling your home is the main goal here. If there’s an item you want to keep, be upfront about it when you’re listing. That way, when it comes to offer time, the item doesn’t become a deal breaker.
The property is under contract now that you’ve accepted an offer. These are very exciting times indeed! Did you know that the road to closing has just begun? Depending on your option period length, whatever financing the buyer needs to acquire (if any), and the closing date noted in the contract–your closing date is in sight, but there’s still a lot that needs to happen. We’ve put together a quick timeline so you have an idea of the road ahead.
